Launching the nursery business
Starting a nursery business is an exciting and complex process and it can be personally and financially rewarding — if you take the time and make the effort to learn the business and develop a closely reasoned and comprehensive business plan. Success in the nursery business isn’t just growing the plants. You must also let everyone know about the business and how your product is superior to the already available products in the trade. Before you can start off, there is some information you should keep in mind about running a nursery business.
This article provides a guide in exploring the current market to readers with the necessary tools on how to do market research and gather necessary data and to incorporate those using the marketing mix in preparing a sound marketing plan.
After going through this article, you should be able to:
- Define marketing management and its basic concepts
- Describe the micro and macro environment of the product/enterprise
- Identify the business threats and opportunities in the market
- Discuss tools that will aid the sellers in identifying enterprise position in the industry.
- Explain the marketing mix and its implications to marketing techniques and strategies.
- Prepare a simple marketing plan
Whatever the reasons for starting the nursery business, there are a number of things one should know and resources that should be available. First, success in the nursery business requires expertise in all phases of plant production, from propagation to post-harvest handling.
To be successful, one needs to be conversant with handling both employees and finances marketing and sales. Finally, all business ventures—including the nursery business—require a capital investment to cover the cost of land, equipment, buildings, supplies, labour and stock, in this case the initial purchase of plants for propagation and growing to salable size.
If experienced and having strong knowledge of plants and plant culture, purchasing an existing business or starting a new one are logical options.
If case of limited or no experience, this can be gained by working for a reputable grower. Many well established nurseries are always looking for good help as full-time, part-time or even seasonal employees.
Deciding to start a nursery is only the first of many decisions to be taken. Objective decisions on all the factors affecting the operation of a business have to be made and a business plan developed.
Critical risks or situation analysis
Critical risks for our tree nurseries are separated into two segments:
Natural disasters and new competition
Natural disasters like drought can be managed by expanding water storage capacity. Pests and diseases can be controlled by constant inspection of plants and application of the required treatments. The risk of opening a new tree nursery in our community can affect our sales. Because of this possible competition we will put extra money into advertising. With regard to evaluating the project as a whole, the following strengths, weaknesses, opportunities and threats have been identified:
Evaluation of enterprises (SWOT analysis)
Participants should be able to list problems they encountered. An exercise to identify their strengths, weaknesses, opportunities and threats should be undertaken.
Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis
Product market expansion grid
The Ansoff approach on the other hand will help one detect possible opportunities for expansion. The Ansoff Approach or Product Market Expansion Grid basically helps you identify opportunities for your product. For example, in a current market what can you do with your existing product if you wish to sell more? You can use promotional activities to attract buyers to switch to your brand or you can attract non-users to use your products.
There is a market but we have no idea how big it is. Promote your producet among consumers through information dissemination, advertising and other promotional activities that can help you penetrate the markets.
Developing a business plan for the nursery
A nursery business plan will help to determine the type, market, location, site, design and size of operation. In addition, one will establish specific details on equipment and employee requirements, operational costs, estimated pricing schemes, projected return on investment and asset availability.
A business plan should cover the following information:
- A description of the business: name, location
- Business objectives and activities with time frames. The objectives must be SMART Current performance analysis
- Marketing plan
- Production plan
- Financial plan/needs/projections and balance sheet.
Types of nursery businesses
Many nursery businesses have diversified to provide a variety of products and services to ensure rapid return on their investment. There are three basic nursery formats:
- Landscape nurseries which grow plants for retail sales and for their in-house landscape service
- Retail nurseries which include small nurseries and garden centres that grow plants on limited acreage for strictly retail sales to the homeowner and to landscape contractors
- Wholesale nurseries which include contract propagators, contract growers, growers and distributors (re-wholesalers) of nursery stock for wholesale to other nurserymen, landscape contractors and retail outlets.
In deciding on the type of nursery business, one begins to define the type and form (rooted cuttings, seedlings, liners, container grown, field-grown seedlings, or a combination) of nursery stock to be grown. Many of these nurseries operate on less than a quarter acre of land.
Licensing, permits and regulations
It must be checked with the local authority if a licence is required. For example, a nursery business in the municipal council must pay annual nursery licensing fees and be subject to council inspections. The costs of licensing and any other authority-mandated certifications must be included in the operational costs.
Knowing the competition in the business is essential in developing a marketing strategy. Understanding what other growers are producing for the market will help to develop a better position for products and services. By developing a competitive analysis one can find out the kinds of products that will sell, along with pricing strategies and promotions that are necessary for keeping the customer interested.
In the corporate world, to get the edge over competitors one must have a product or service that others perceive as different from everything else offered, while also fulfilling the wants and needs of consumers better than any other product or service. In the nursery industry there is no difference. In order to successfully develop a niche, one must determine what makes them better than other products. Product quality, selection, lowest price and fastest service are what should define your nursery.
Defining the market
Defining the market involves answering the question: Who is the customer? This question will be partially answered by the type of business you choose and the location of your operation (urban or rural). For wholesale nurseries, the type of customer will depend partly on the characteristics of the nursery location and site (e.g., soil texture, temperature) as they affect the products to be sold (rooted cuttings, liners, balled and potted, or container grown seedlings).
Each nursery owner must analyze and organize his or her own marketing channels, develop a sales programme, prepare the product for distribution, extend credit, and make collections. Possible approaches to defining your market and customers are:
- Define the types of customers within your target market based on MoA and KFS data and advice
- Determine customer preferences for products and services by investigating the local competition
- Use local and national association and government data to determine market trends anticipate future preferences on the types and number of plants to grow
- Promote plants that you or other colleagues consider outstanding.
Marketing strategy is based on becoming an option for contractors and the general public to fill their plant and agroforestry needs and must include performance in the following areas:
- Customer service
- Knowledgeable staff
- Affordable prices
- Great location
- Quantity and quality of plants, seedlings, trees and saplings
Factors that influence primary sales:
- Excellent customer service
- Exceptional product knowledge
- Large and varied offer of trees and saplings
- Good location
- Good quality of saplings
- Affordable prices
What product mix?
After evaluating the environment and identifying the opportunities for the business one can now start strategizing by identifying the target market and delivering the product needed. Marketing of any business can be broken down by using the 4 Ps — Product, Price, Promotion and Placement.
One of the most frequently asked questions is: “What should be grown?’’ This can be answered through a market survey.
This will involve:
- Idea generation
- Idea screening: what will it cost to produce? Is it a viable business? Is there demand for the product?
- Concept development/testing: what exactly do consumers want?
- Business analysis: what is the expected production for sustainability?
- Market testing: typical usage of a situation
- Commercialization: product launching and mass production.
What should the price be? First and foremost, the price should be set high enough to generate a profit for the business, but must also be attractive to consumers. In determining the price, several questions must be asked:
- What are customers willing to pay?
- Are all costs covered; where is the break even?
- What does the competition charge?
- How much profit do you want to generate?
In determining the price it is important to use the cost of production as the base. To determine this, divide the production cost into variable and fixed costs. Variable costs are out-of-pocket, such as labour, materials and advertising. Fixed costs are incurred whether products are sold or not, such as rent, equipment and utilities. Following is a list of formulas used throughout business in determining the production cost. If after using these models the selling price is found to be more than that of competitors, ways must be found to lessen costs of production or accept less profit without affecting the overall quality of the product.
Promotion strategy is everything that a person does for the customer to encourage them to purchase the product. This includes not only advertising, but also public relations and personal contact. A nursery does not only sell the plant, but the aesthetic beauty it will provide in the landscape. You need to decide what the product will do for your consumers. The concept of your promotion strategies should be to capture the attention of the public and get them to buy the product.
Which promotional media is most effective to capture your attention? Rank the different promotional media below from 1 (least effective) to 10 (most effective).
Now that the product is ready for sale, priced, and consumers know that it exists, how do they get it? This is known as placement of the product, or getting the goods to the customer when and where they want it (distribution). Distributing the product can represent from 10-50 per cent of the final price of the product in shipping and freight situations.
Often businesses such as nurseries do not have the resources to individually deliver the product to the consumer. A nursery therefore relies on channels of distribution already established by wholesalers, retailers, distributors, brokers and cooperatives. A nursery can produce the best quality plants, have a reasonable yet appealing price and everyone may know about it; but if the consumer is unaware, this is a recipe for failure. On-time deliveries and prompt services build the name of a business, promoting word-of-mouth advertising which is the best kind because its free.
Marketing in the nursery industry is just as important as in any other business. One cannot simply rely on people to ‘’just ‘know’’ that you are a good grower; you have to make it known. With the proper marketing strategies it is possible to succeed in this business.
Remember, growing the plants right and maintaining them is only the first step.
Other Ps in marketing
- People: the workers must have adequate information on the products and customers.
- Process: channel to deliver the product and service.
- Physical evidence: portray products in shows, field days and demos.
- Packaging: what packaging is required; small or big? Ensure attractive packaging.
You have to remember; whatever type of market you decide to serve constraints are always present. Problems from both micro- and macro- environment affect the strategies you will employ in your marketing activity, it should not be ignored, but rather given utmost importance and factored-in before a decision is made.
Form a group, identify a product you wish to market, through a face-to-face interview (using marketing mix as a guide in questioning) with the group members do a market research, analyze its potential using the different strategies identified and make a marketing plan.
Activity: Phases of development
Phase 1: Pre-establishment
Phase 2: Establishment (current)
Phase 3: Expansion/diversification
Phase 1: Self-sponsored
- Establish relationship with extension and research system
- Determine varieties
- Determine price
- Establish contacts with NGOs, farmers’ associations and schools
- Plant a seed plot for two seasons and sell seed
Phase 2: 2-3 years
- Register business
- Open bank account
- Take orders
Phase 3: After 3 years
- Introduce new crops and varieties
- Purchase new/larger equipment
- Obtain loan
- Expand market
Nursery business prospectus
By this point, you should have a good idea of the many factors involved in starting a nursery operation. This publication has discussed many factors that affect the starting of a nursery business. The following checklist should help you prepare the kind of organized, comprehensive business you’ll need before you can arrange financing.
- Size of operation
- Type of operation (products to be offered)
- Cost of equipment and employees (number and type)
- Market (source and dependability)
- Estimated returns
- References (from other business operators and community leaders)